Qimonda Insolvency Could Boost DRAM Prices

DRAMeXchange said in a statement that it believes that the price of the DRAM may rise as a result of Qimonda's insolvency filing. But the price level is still expected to be just around manufacturing cost, still an aggressive price level that favors buyers.

The research firm said there was "high possibility" for a 10 percent cut in global supply of dynamic random access memory (DRAM) as long as other vendors stick to their capacity cut plans.

Prices for DDR2 1Gb chips, used as the main memory chip in many personal computers, could rise from below $1 currently to $1.2 to $1.5 level, which is the cash cost for vendors, said DRAMeXchange, a leading price-tracking organisation for the industry.

The sector has been mired in its worst-ever downturn for more than a year, with all major players reporting losses on their operations due to a large oversupply of the chips used mainly in PCs.

Qimonda on Friday became the first major maker of DRAM chips to file for insolvency as a result of huge industry price declines and a global financing squeeze.

Also on Friday, Samsung Electronics, the world's largest DRAM maker, posted its first-ever quarterly loss in large part due to its DRAM business.

According to preliminary estimates from iSuppli, global DRAM revenue fell by 19.8 percent in 2008 to $25.2 billion, the second year of decline, and is expected to drop another 4.3 percent this year.

"Qimonda's insolvency means global (2009) DRAM bit shipment growth now is expected to be less than the 30 percent level, down from iSuppli's previous forecast of 35 percent," Nam Hyung Kim, chief analyst for memory at iSuppli, said in a statement.

Kim said the potential impact of the Qimonda insolvency will come in the graphics and server chip markets as in the third quarter of 2008 it accounted for 26 percent of shipments of graphic DRAMs. These are used in the video subsystems in computers and consumer electronics devices, and control 15 percent to 20 percent of the global market for DRAM for servers. (Reporting by Tarmo Virki; Editing by Simon Jessop and Sharon Lindores)